WASHINGTON, Aug. 9 /PRNewswire-FirstCall/ -- The Federal Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM; AGM.A) today reported second quarter core earnings of $5.3 million ($0.50 per diluted common share) and GAAP net income available to common stockholders for the period of $1.8 million ($0.17 per diluted common share). Second quarter 2009 core earnings were $4.7 million ($0.46 per diluted common share) and GAAP net income available to common stockholders was $25.4 million ($2.49 per diluted common share). Second quarter 2009 GAAP results benefited from a $20.3 million after tax increase in the value of financial derivatives. Farmer Mac excludes such fair value fluctuations from its core earnings.
Farmer Mac President and Chief Executive Officer Michael Gerber stated, "With the capital raise behind us and core earnings growing again, Farmer Mac is fully focused on growing our $10.8 billion portfolio of outstanding loans, guarantees and commitments and continuing to serve rural America. Our purchases of individual loans under both the Farmer Mac I and Farmer Mac II programs are at a record pace. Through the end of this year's second quarter, new business volume was sufficient to offset the repayment of loans in our portfolio. In addition, we see continued interest in our products targeted at loan portfolios, as evidenced by a new $250 million transaction completed in July, after the end of the second quarter. With lenders in both the agricultural and rural utilities sectors looking for sources of capital and liquidity and to reduce their credit risk exposures, Farmer Mac represents an important potential solution for those challenges and a means to meet the borrowing needs of lenders' rural customers."
For the quarter ended June 30, 2010, Farmer Mac realized an effective net interest spread of 108 basis points, compared to 82 basis points for the quarter ended June 30, 2009. This increased spread combined with growth in our core business produced $15.5 million of net interest spread in second quarter 2010, compared to $9.9 million in second quarter 2009.
Farmer Mac's 90-day delinquencies were $56.0 million (1.30 percent of the portfolio) as of June 30, 2010, down from $70.4 million (1.64 percent) as of March 31, 2010, but up from $42.3 million (0.95 percent) as of June 30, 2009. The decrease in delinquencies when compared to March 31, 2010 is primarily due to the annual (January 1st) and semi-annual (January 1st and July 1st) payment characteristics of most Farmer Mac I loans. For much of 2009, the 90-day delinquencies were concentrated in the ethanol industry and this concentration has been significantly reduced. Ethanol loans comprised $10.9 million of the $56.0 million of 90-day delinquencies as of June 30, 2010, compared to $18.8 million of $42.3 million as of June 30, 2009. Certain sectors of agriculture continue to show stress -- most notably dairy. Given current conditions, Farmer Mac anticipates many sectors will continue to experience challenges during the second half of 2010, with delinquencies, losses and charge-offs likely to remain higher than the historical average, but within the Corporation's historical experience. As of June 30, 2010, there were no delinquencies in Farmer Mac's portfolio of rural utilities loans.
"We continue to move forward with building a strong Farmer Mac," continued Mr. Gerber. "Earnings are improving even with the additions to the reserve, growth is beginning to occur and the portfolio remains stable in spite of stress in sectors such as dairy. With a solid balance sheet and a strong focus on growth in our mission volume we are encouraged with the second quarter results."
Farmer Mac uses core earnings, a non-GAAP financial measure, to measure corporate economic performance and develop financial plans because, in management's view, core earnings more accurately represent Farmer Mac's economic performance, transaction economics and business trends before the effects on earnings of temporary changes in the recorded fair values of assets and liabilities and other one-time items. Core earnings differs from GAAP net income primarily by excluding unrealized gains or losses on financial derivatives and trading assets, lower of cost or fair value adjustments on loans held for sale and, for first half of 2010, other items related to the retirement of preferred stock and the amortization of premiums on assets consolidated at fair value. Farmer Mac's disclosure of this non-GAAP measure is not intended to replace GAAP information but, rather, to supplement it.
A reconciliation of Farmer Mac's GAAP net income available to common stockholders to core earnings is presented in the following table.
Reconciliation of GAAP Net Income Available to Common Stockholders to Core Earnings For the Three Months Ended -------------------------- June 30, 2010 ------------- Per Diluted Share ----- (in thousands, except per share amounts) GAAP net income available to common stockholders $1,824 $0.17 Less the net of tax effects of: Unrealized (losses)/gains on financial derivatives (4,016) (0.38) Unrealized gains on trading assets 3,288 0.31 Amortization of premiums on assets consolidated at fair value (2,701) (0.25) Issuance costs on the retirement of preferred stock - - Net effects of settlements on agency forward contracts (94) (0.01) Lower of cost or fair value adjustment on loans held for sale 58 - --- --- Core earnings $5,289 $0.50 ------ ----- For the Three Months Ended -------------------------- June 30, 2009 ------------- Per Diluted Share ----- (in thousands, except per share amounts) GAAP net income available to common stockholders $25,385 $2.49 Less the net of tax effects of: Unrealized (losses)/gains on financial derivatives 20,281 1.99 Unrealized gains on trading assets 23 - Amortization of premiums on assets consolidated at fair value - - Issuance costs on the retirement of preferred stock - - Net effects of settlements on agency forward contracts 367 0.04 Lower of cost or fair value adjustment on loans held for sale - - --- --- Core earnings $4,714 $0.46 ------ ----- For the Six Months Ended ------------------------ June 30, 2010 ------------- Per Diluted Share ----- (in thousands, except per share amounts) GAAP net income available to common stockholders $3,591 $0.34 Less the net of tax effects of: Unrealized (losses)/gains on financial derivatives (2,129) (0.20) Unrealized gains on trading assets 5,476 0.52 Amortization of premiums on assets consolidated at fair value (3,383) (0.32) Issuance costs on the retirement of preferred stock (5,784) (0.56) Net effects of settlements on agency forward contracts 112 0.01 Lower of cost or fair value adjustment on loans held for sale (1,420) (0.13) ------ ----- Core earnings $10,719 $1.02 ------- ----- For the Six Months Ended ------------------------ June 30, 2009 ------------- Per Diluted Share ----- (in thousands, except per share amounts) GAAP net income available to common stockholders $58,903 $5.80 Less the net of tax effects of: Unrealized (losses)/gains on financial derivatives 30,009 2.95 Unrealized gains on trading assets 20,580 2.03 Amortization of premiums on assets consolidated at fair value - - Issuance costs on the retirement of preferred stock - - Net effects of settlements on agency forward contracts (1,193) (0.12) Lower of cost or fair value adjustment on loans held for sale - - --- --- Core earnings $9,507 $0.94 ------ -----
More complete information on Farmer Mac's performance for the quarter ended June 30, 2010 is set forth in the Form 10-Q filed by Farmer Mac earlier today with the Securities and Exchange Commission (SEC).
Forward-Looking Statements
In addition to historical information, this release includes forward-looking statements that reflect management's current expectations for Farmer Mac's future financial results, business prospects and business developments. Management's expectations for Farmer Mac's future necessarily involve a number of assumptions and estimates and the evaluation of risks and uncertainties. Various factors or events could cause Farmer Mac's actual results to differ materially from the expectations as expressed or implied by the forward-looking statements, including uncertainties regarding: (1) the availability to Farmer Mac and Farmer Mac II LLC of debt financing on reasonable rates and terms; (2) legislative or regulatory developments that could affect Farmer Mac; (3) fluctuations in the fair value of assets held by Farmer Mac and Farmer Mac II LLC; (4) the rate and direction of development of the secondary market for agricultural mortgage and rural utilities loans, including lender interest in Farmer Mac credit products and the Farmer Mac secondary market; (5) the general rate of growth in agricultural mortgage and rural utilities indebtedness; (6) borrower preferences for fixed rate agricultural mortgage indebtedness; (7) the impact of economic conditions and real estate values on agricultural mortgage lending; (8) the willingness of investors to invest in Farmer Mac Guaranteed Securities; (9) developments in the financial markets, including possible investor, analyst and rating agency reactions to events involving GSEs, including Farmer Mac; and (10) the future level of interest rates, commodity prices, and export demand for U.S. agricultural products. Other risk factors are discussed in Farmer Mac's Annual Report on Form 10K for the year ended December 31, 2009, as filed with the SEC on March 16, 2010 and in Farmer Mac's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, as filed with the SEC earlier today. The forward-looking statements contained in this release represent management's expectations as of the date of this release. Farmer Mac undertakes no obligation to release publicly the results of revisions to any forward-looking statements included in this release to reflect new information or any future events or circumstances, except as otherwise mandated by the SEC.
Farmer Mac is a stockholder-owned instrumentality of the United States chartered by Congress to establish a secondary market for agricultural real estate and rural housing mortgage loans, rural utilities loans, and USDA-guaranteed farm program and rural development loans. Farmer Mac's Class C non-voting and Class A voting common stocks are listed on the New York Stock Exchange under the symbols AGM and AGM.A, respectively. Additional information about Farmer Mac (as well as the Annual Report on Form 10-K and Quarterly Report on Form 10-Q referenced above) is available on Farmer Mac's website at http://www.farmermac.com/. Farmer Mac II LLC is a Delaware limited liability company, in which Farmer Mac owns all of the common equity, that operates the Farmer Mac II business of purchasing and holding USDA-guaranteed loans. Additional information about Farmer Mac II LLC is available on its website at http://www.farmermac2.com/.
The conference call to discuss Farmer Mac's second quarter 2010 financial results and the Corporation's Form 10-Q for second quarter 2010 will be webcast on Farmer Mac's website beginning at 11:00 a.m. eastern time on Tuesday, August 10, 2010. An audio recording of that call will be available on Farmer Mac's website for two weeks after the call is concluded.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) December June 30, 31, 2010 2009 ---- ---- (in thousands) Assets: Cash and cash equivalents $325,333 $654,794 Investment securities: Available-for-sale, at fair value 1,175,376 1,041,923 Trading, at fair value 81,956 89,972 ------ ------ Total investment securities 1,257,332 1,131,895 --------- --------- Farmer Mac Guaranteed Securities: Available-for-sale, at fair value 1,718,140 2,524,867 Trading, at fair value - 874,129 --- ------- Total Farmer Mac Guaranteed Securities 1,718,140 3,398,996 --------- --------- USDA Guaranteed Securities: Available-for-sale, at fair value 880,424 - Trading, at fair value 386,496 - ------- --- Total USDA Guaranteed Securities 1,266,920 - --------- --- Loans: Loans held for sale, at lower of cost or fair value 908,778 666,534 Loans held for investment, at amortized cost 96,057 93,478 Loans held for investment in consolidated trusts, at amortized cost 1,332,624 - Allowance for loan losses (9,495) (6,292) ------ ------ Total loans, net of allowance 2,327,964 753,720 --------- ------- Real estate owned, at lower of cost or fair value 4,023 739 Financial derivatives, at fair value 37,121 15,040 Interest receivable 72,616 67,178 Guarantee and commitment fees receivable 36,579 55,016 Deferred tax asset, net 10,405 24,146 Prepaid expenses and other assets 43,057 37,289 ------ ------ Total Assets $7,099,490 $6,138,813 ---------- ---------- Liabilities, Mezzanine Equity and Equity: Liabilities: Notes payable: Due within one year $3,226,745 $3,662,898 Due after one year 2,269,421 1,908,713 --------- --------- Total notes payable 5,496,166 5,571,611 Debt securities of consolidated trusts held by third parties 882,629 - Financial derivatives, at fair value 132,675 107,367 Accrued interest payable 52,913 39,562 Guarantee and commitment obligation 32,762 48,526 Accounts payable and accrued expenses 19,397 23,445 Reserve for losses 9,470 7,895 ----- ----- Total Liabilities 6,626,012 5,798,406 --------- --------- Commitments and Contingencies Mezzanine Equity: Series B redeemable preferred stock, par value $1,000 per share, 150,000 shares authorized, issued and outstanding as of December 31, 2009 (redemption value $150,000,000) - 144,216 Stockholders' Equity: Preferred stock: Series C, par value $1,000 per share, 100,000 shares authorized, 57,578 issued and outstanding 57,578 57,578 Common stock: Class A Voting, $1 par value, no maximum authorization, 1,030,780 shares outstanding 1,031 1,031 Class B Voting, $1 par value, no maximum authorization, 500,301 shares outstanding 500 500 Class C Non-Voting, $1 par value, no maximum authorization, 8,745,269 shares outstanding as of June 30, 2010 and 8,610,918 shares outstanding as of December 31, 2009 8,745 8,611 Additional paid-in capital 98,925 97,090 Accumulated other comprehensive income 31,469 3,254 Retained earnings 33,377 28,127 ------ ------ Total Stockholders' Equity 231,625 196,191 ------- ------- Non-controlling interest - preferred stock 241,853 - ------- --- Total Equity 473,478 196,191 ------- ------- Total Liabilities, Mezzanine Equity and Equity $7,099,490 $6,138,813 ---------- ---------- FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) For the Three Months Ended -------------------- June 30, June 30, 2010 2009 --------- --------- (in thousands, except per share amounts) Interest income: Investments and cash equivalents $6,390 $7,049 Farmer Mac and USDA Guaranteed Securities 18,795 25,805 Loans 32,142 8,896 ------ ----- Total interest income 57,327 41,750 Total interest expense 35,719 21,849 ------ ------ Net interest income 21,608 19,901 Recoveries/(provision) for loan losses 1,870 5,693 ----- ----- Net interest income after recoveries/ (provision) for loan losses 23,478 25,594 ------ ------ Non-interest (expense)/income: Guarantee and commitment fees 5,710 7,908 (Losses)/gains on financial derivatives (15,840) 21,528 Gains on trading assets 5,058 35 Other-than-temporary impairment losses - (2,292) (Losses)/gains on sale of available-for- sale investment securities - (300) Gains on sale of loans and Farmer Mac Guaranteed Securities - - Lower of cost or fair value adjustment on loans held for sale 90 - Other income 211 101 --- --- Non-interest (expense)/income (4,771) 26,980 ------ ------ Non-interest expense: Compensation and employee benefits 3,907 3,572 General and administrative 2,051 2,986 Regulatory fees 562 512 Real estate owned operating costs/ (income), net 298 (16) Provision/(recoveries) for losses 3,043 (529) ----- ---- Non-interest expense 9,861 6,525 ----- ----- Income before income taxes 8,846 46,049 Income tax expense 756 16,534 --- ------ Net income 8,090 29,515 Less: Net income attributable to non- controlling interest - preferred stock dividends (5,546) - ------ --- Net income attributable to Farmer Mac 2,544 29,515 Preferred stock dividends (720) (4,130) Loss on retirement of preferred stock - - --- --- Net income available to common stockholders $1,824 $25,385 ------ ------- Earnings per common share and dividends: Basic earnings per common share $0.18 $2.50 Diluted earnings per common share $0.17 $2.49 Common stock dividends per common share $0.05 $0.05 For the Six Months Ended ------------------ June 30, June 30, 2010 2009 --------- --------- (in thousands, except per share amounts) Interest income: Investments and cash equivalents $12,873 $15,958 Farmer Mac and USDA Guaranteed Securities 39,626 53,564 Loans 65,560 19,381 ------ ------ Total interest income 118,059 88,903 Total interest expense 72,834 45,562 ------ ------ Net interest income 45,225 43,341 Recoveries/(provision) for loan losses (980) 2,159 ---- ----- Net interest income after recoveries/ (provision) for loan losses 44,245 45,500 ------ ------ Non-interest (expense)/income: Guarantee and commitment fees 11,629 15,318 (Losses)/gains on financial derivatives (21,644) 23,239 Gains on trading assets 8,425 31,660 Other-than-temporary impairment losses - (2,373) (Losses)/gains on sale of available-for- sale investment securities 240 2,850 Gains on sale of loans and Farmer Mac Guaranteed Securities - 1,581 Lower of cost or fair value adjustment on loans held for sale (2,184) - Other income 1,040 335 ----- --- Non-interest (expense)/income (2,494) 72,610 ------ ------ Non-interest expense: Compensation and employee benefits 7,418 7,597 General and administrative 4,554 5,900 Regulatory fees 1,125 1,025 Real estate owned operating costs/ (income), net 308 5 Provision/(recoveries) for losses 1,575 1,990 ----- ----- Non-interest expense 14,980 16,517 ------ ------ Income before income taxes 26,771 101,593 Income tax expense 5,092 34,624 ----- ------ Net income 21,679 66,969 Less: Net income attributable to non- controlling interest - preferred stock dividends (9,614) - ------ --- Net income attributable to Farmer Mac 12,065 66,969 Preferred stock dividends (2,690) (8,066) Loss on retirement of preferred stock (5,784) - ------ --- Net income available to common stockholders $3,591 $58,903 ------ ------- Earnings per common share and dividends: Basic earnings per common share $0.35 $5.81 Diluted earnings per common share $0.34 $5.80 Common stock dividends per common share $0.10 $0.10
Farmer Mac
CONTACT: Richard Eisenberg, Investor Inquiries, or Chris Bohanon, Media
Inquiries, both of Farmer Mac, +1-202-872-7700
Web Site: http://www.farmermac.com/
